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Deere's Surprising Harvest In Health Care

July 10, 1994

The Corporation

DEERE'S SURPRISING HARVEST IN HEALTH CARE

Executives at Deere & Co. had a novel plan back in 1985. Concerned about runaway health-care costs, Deere founded its own health-maintenance organization. The company hoped that its Heritage National Healthplan could control spending while still providing adequate services to employees.

As it turned out, Deere's HMO proved far more successful than executives at the company's Moline (Ill.) headquarters ever imagined. Besides putting the brakes on costs, it was a hit with Deere employees. Before long, Deere even began selling its HMO service to other companies. Today, only 22% of the HMO's 290,000 members have any relation to the agricultural-equipment manufacturer. Most work at 300 other client companies, including Chrysler, Eastman Chemical, and Woolworth.

Now, Deere is building on its surprising success in health care. In early 1993, the company opened a primary-care clinic in Moline. The facility, built in partnership with the Mayo Clinic of Rochester, Minn., treats patients on site rather than passing them on to more costly specialists. Two other clinics are scheduled to open on July 1 in Des Moines and Waterloo, Iowa. The clinics, which are run by Mayo administrators, will eventually serve 11,600 Deere employees.

Pushing further into health care in this era of sweeping reform may seem a bit ill timed. But Deere believes that the benefits are well worth the risk. Thanks to services offered through John Deere Health Care Inc., the subsidiary that oversees Deere's health ventures, the company reckons that its annual health-care costs increased 11% a year since 1985 instead of the 13% that the company had anticipated. What's more, the health-care unit doesn't depend on any corporate subsidies. Its profits rose 43% last year, to $11.2 million, as revenues climbed 19%, to $388.6 million.

PHONE PROMPTING. One reason for Deere's success: It's applying the same cost and quality standards to its health-care facilities that it does at its tractor plants. For example, a team of Deere and Mayo staffers are developing standard procedures to treat 20 common illnesses, including heart disease, lower back problems, and depression. By standardizing patient care, Deere hopes to eliminate duplicate tests and treatments. In the past, for instance, people who needed back surgery had both magnetic resonance imaging and a CAT scan, even though the tests were very similar. Nowadays, patients just receive an MRI. "The message from manufacturing is do it right the first time," says Richard J. Van Bell, president of Deere's health-care unit.

Deere is also encouraging clinic employees to meet regularly to come up with ways to save money, just as it calls on hourly workers at its factories to review assembly-line methods. One recent innovation suggested by a group of clinic staffers: calling patients to urge them to use preventive-care programs at the clinic. Last year, for example, the clinic made sure that 80% of its expectant mothers got prenatal care during the critical first three months of pregnancy. And 75% of its diabetic patients, who are often prone to vision problems, got eye exams. "If we screen people up front," says Van Bell, "we can improve people's health status before things get serious."

WAITING-ROOM RELIEF. Despite the emphasis on costs, quality is also a big priority at the clinic, according to Van Bell, a former human-resources executive and a 32-year veteran of Deere. Doctors, for instance, are graded quarterly by their patients. Their performance reviews are detailed to the point that they include feedback from patients about their bedside manner. And the average wait for an appointment is kept to 15 minutes. Deere's HMO pays similar attention to quality. And many of its corporate customers seem satisfied. "They try to manage health care, not just costs," says F. Rob Johnson, benefits manager for Eastman Chemical Corp. About three out of every four of the Kingsport (Tenn.)-based company's 11,000 employees belong to Deere's HMO.

If all goes well, Bell says, Deere will open even more clinics in the years ahead. If so, Deere's clinics may start growing as fast as its HMO, which recently expanded into its fifth state, Virginia, and started taking on Medicaid patients in Iowa and Tennessee. That kind of success certainly has Deere's unions happy. "Saving dollars on health care translates into higher wages," says Jim Hecker, a United Auto Workers official who sits on the board of Heritage. Substitute "profits" for "wages" and you have Deere's philosophy, exactly.Kevin Kelly in Moline, Ill.